Weiss Ratings: 20 Giant Banks Still Vulnerable

Later this morning, Weiss Ratings is issuing a landmark press release, warning that 20 giant U.S. banks are still vulnerable to serious financial difficulties — and even failure. (I’ll name them in a moment.)

With 73 bank failures so far this year, double last year’s pace … with a new phase of the global debt crisis now unfolding … and with the dangers in the Dow I told you about Thursday … this news has far-reaching implications! So I wanted to give you this heads up.

First, just in case our Weiss Ratings are new to you, let me explain what they are. We began issuing ratings on 13,000 banks in 1987 — based on a statistical analysis of their capital, asset quality, earnings, liquidity, and other factors.

Unlike other major ratings agencies, Weiss Ratings never accepts compensation of any kind from the companies it rates.

Unlike other rating agencies, we do not grade companies on a curve. If they’re weak and they put your investments or savings at risk, we say so. No sugarcoating.

And unlike other agencies, we never delay downgrades or suppress publication of a company’s rating.

Our independence and objectivity help explain why we have accurately identified the weakness of nearly all banks that subsequently failed in the last 23 years.

Plus, it’s why …

The New York Times wrote Weiss was “the first to see the dangers and say so unambiguously;”

Barron’s wrote that Weiss is “the leader in identifying vulnerable companies;” and

Esquire concluded that Weiss Ratings is “the one company [that] … provides financial grades free of any conflicts of interest.”

Second, what our ratings mean. We rate companies on a scale similar to school grades:

• A = excellent

• B = good

• C = fair

• D = weak

• E = very weak

• F = failed

• plus sign = upper third of the grade range

• minus sign = lower third of the grade range

Third, our general recommendations. Regardless of government guarantees or bailouts, we believe you should seek to:

• Avoid institutions with a Weiss Rating of D+ or lower. These are the institutions on our “weakest” list, considered vulnerable.

• Do business with those boasting a Weiss Rating of B+ or higher. These are on our “strongest” list, and we generally recommended them for their safety.

Fourth, it’s time to name names. There are currently 20 very large institutions (with $25 billion or more in assets) in our vulnerable or “weakest” category, including Bank of America, Citibank, Wachovia, HSBC Bank USA, SunTrust, Regions Bank, RBS Citizens, plus the 13 others listed in the table below.

Fifth, unfortunately, there are many more which are also vulnerable — a total of 2,259* U.S. banks and thrifts in the U.S. that currently receive a Weiss Rating of D+ or lower.

Sixth, fortunately, there are still many strong banks in America — 962 institutions receiving a Weiss Rating of B+ or higher.

Seventh, despite the strong banks, the banking system as a whole remains very weak. This is because the weakest banks hold $5.8 trillion, or 44.7 percent of the industry’s total assets. But the strongest banks hold only $483 billion, or a meager 3.7 percent of the industry’s assets.

Is your bank safe? Where can
you find a strong bank near you?

The big dilemma in America today is that, while many of the largest banks are still weak, most of the strongest banks are relatively small with fewer branches.

That makes it more likely that your bank is among the vulnerable institutions. Plus, it can make it more difficult for you to find a bank worthy of your money.

Good news: Tomorrow, I will give you our lists of ratings to help you find out if your bank is among the weakest; and if it is, to help you find a strong bank in your state.

Better news: Given the severity of this situation and the growing difficulty of finding a truly safe place for your money, we have decided to end our former business practice of charging our readers for our ratings. We will provide them free of charge.

So stand by for my email tomorrow in which I will give you direct access to our latest lists of the weakest and strongest institutions.

When you get the lists, just remember one thing: Even if a bank is bailed out or taken over by the FDIC, you can

• miss out on promised interest income,

• lose access to lines of credit, and

• suffer other serious inconveniences.

Worse, if you’ve invested in the bank’s stocks, bonds, or debentures … or if you have uninsured deposits not covered by the FDIC … you could suffer substantial losses in a failed bank.

So whether you believe the government can adequately protect your savings — or not — I recommend that you seriously consider avoiding the weakest while seeking to do business only with the strongest.

Good luck and God bless!

Martin

Coming tomorrow: Free access to our complete lists of the 2,259 weakest banks and thrifts in the U.S., plus the 962 strongest. Look for an email from Weiss Ratings.

* Revised to reflect banks with a rating of D- or lower that have just failed, and have therefore been removed from the list.

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